Travel card spending in North America dipped about 10
percent during the 2008-2009 downturn but "rebounded significantly in 2010
to $156 billion," just shy of the pre-recession "high-water mark of
$157 billion in 2007," according to RPMG Research Corp.'s 2011 Corporate
Travel Card Benchmark Survey.
Travel card volume is projected to rise to $186 billion by
2015, according to the study, which surveyed 1,234 travel card program
administrators between November 2010 and January 2011. About two-thirds worked
for public or private companies, 24 percent for government entities and 10
percent for not-for-profits. Respondents used corporate cards from American
Express, MasterCard and Visa.
Travel card spending is "hypersensitive" to
economic changes, researchers noted, and thus grew faster between 2004 and 2007
before declining 3.2 percent in 2008 and 9.2 percent in 2009, when gross
domestic product fell 2.2 percent.
Corporate respondents projected an average card spending
increase of 6.2 percent this year and a cumulative rise of 20 percent by 2015.
Volume is expected to rise due to increased business (80 percent), increased
travel by employees (76 percent), more cards issued within their organizations
(69 percent) and increased travel prices (69 percent).
Spend Captured On
Cards
About 76 percent of travel spending was captured on cards,
up from 70 percent in 2006, partly due to decreased use of cash, checks or
personal cards, according to the research. While the study found that 26
percent of employees typically travel on company business more than twice a
year, only 19 percent were issued cards. Air travel costs accounted for 36
percent of card charges, followed by lodging (22 percent), restaurants (11
percent), car rentals (7 percent), meetings (6 percent), entertainment and
other travel (4 percent each). Another 10 percent went to non-travel purchases.
Carrot Or Stick?
About 65 percent of respondents said their firms mandate
travel card use, while 33 percent said their programs provide reward or loyalty
points to the company or employee. "Our analysis indicates that mandates
are significantly more effective than rewards at driving higher levels of
travel card spending program performance," according to the study.
"Best practice performers," those whose percentage
of travel spending captured on cards is among the highest quartile of
respondents, typically issued cards to 31 percent of employees and captured 93
percent of travel spending on cards. Researchers found that 31 percent of
respondents captured more than 90 percent of travel spending on the card, 45
percent of respondents captured between 60 percent and 90 percent, and 24
percent captured less than 60 percent
Of total travel spending captured by card accounts, "the
vast majority is captured on plastic (83 percent) and ghost card accounts (14
percent)," according to the report. Among "best practice companies,"
researchers found that 91 percent of travel card spending is on plastic, 7
percent on ghost accounts and 2 percent on other cards.
"Over-reliance on centralized purchases of travel and
payment by ghost accounts may be connected to travel spending slippage among 'needs
improvement' organizations," where 19 percent of travel spending is paid
by employees via cash, check or personal credit card versus just 4 percent paid
in such ways at the best practice firms.
"Best practice travel card programs are less likely to
focus on reducing the amount of travel, but rather emphasize managing travel
costs by reducing the prices paid for travel services by consolidating air
travel on fewer select airlines, staying in less-expensive hotels and rooms and
booking lower-class auto rentals," researchers noted. " 'Needs
improvement' companies are more likely to have a strategy to manage travel
costs that involves taking fewer trips, taking fewer employees on those trips,
using alternative technology to avoid trips and tighter enforcement of travel
policy."
RPMG Research recommended as best practices for travel card
programs top management support, employee understanding of card program
benefits, broad distribution of plastic instead of ghost cards and mandated use.
Originally published
in the November 2011 issue of Travel
Procurement.